A recent slump for shares of home-booking website Airbnb could be an opportunity for investors, according to a Wall Street analyst. Wedbush on Tuesday upgraded its outlook on Airbnb stock to a bullish outperform rating from its previous neutral stance.
"We think investors should take advantage of this period of relative weakness," Wedbush analyst Scott Devitt wrote in a Tuesday client note. Airbnb shares entered Tuesday down 8.5% since the company's May 8 first quarter earnings report. But Devitt said that positive travel data so far indicates there is upside to the "disappointing" second-quarter guidance Airbnb gave earlier this month.
On the stock market today, Airbnb stock gained 1.8% to close at 147.
Airbnb Analyst Sees Attractive Underlying Growth Opportunity
The Wedbush upgrades cites both near and long-term trends as positive for Airbnb stock. In the short-term, recent industry commentary has pointed to a strong summer travel season. The Olympics in Paris and Euro Cup in Germany should help.
In its Q1 shareholder letter published earlier this month, Airbnb said that its second quarter faces a significant "sequential headwind" from Leap Day and the earlier timing of the Easter holiday boosted first quarter results.
The company also said it expects the growth rate for nights booked to be "relatively stable" to what it recorded in the first quarter. But Devitt said metrics such as strong travel-related web traffic and industry commentary points to "upside" for that outlook.
"Longer-term, Airbnb's growth opportunity remains attractive given the relatively low penetration of alternative as a percentage of total accommodation room nights and the option to layer in additional products and services for both guests and hosts," Devitt added.
Devitt noted that Airbnb could also add sponsored listings to boost its take-rate, a term for percentage the company collects on each booking.
Along with the positive rating, Wedbush upped its price target for Airbnb stock to 165, from a previous 160. The target implies 14% upside from Airbnb's price at the time of the report.
Airbnb Stock: Up 7% This Year
Airbnb stock has advanced 7.8% this year, trailing an 11% gain from the S&P 500.
It has been a rocky first five months of 2024 for the home-booking company. Shares broke out from a consolidation pattern in February and climbed to a 52-week high of 170.10 in March.
But shares are off about 13% from the March high, with biggest tumble coming the day after Airbnb's first quarter report earlier this month.
Meanwhile, Airbnb stock has an IBD Composite Rating of 85 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Airbnb's IBD Relative Strength Rating is 66 out of 99.
